Middle East escalation rattles Europe’s energy security

The new crisis in the Middle East is opening increasingly bleak scenarios for Europe’s energy supplies, fuelling the risk of a renewed spike in inflation across the Eurozone. Iran’s response to air and missile strikes launched from 28 February by the United States and Israel has primarily targeted Gulf oil-producing countries, disrupting maritime traffic through the Strait of Hormuz, the Red Sea and the Suez Canal, and interrupting parts of extraction and refining operations, EUalive’s partner FocusEurope.it reports.

In recent days, Iranian drones have struck infrastructure belonging to Saudi Aramco, including the Ras Tanura refinery in eastern Saudi Arabia, one of the Kingdom’s most important facilities, causing partial production outages.

The abrupt halt in Qatar’s liquefied natural gas (LNG) production – representing roughly 20% of global supply- following Iranian drone strikes on key facilities at Ras Laffan and Mesaieed has dealt a severe blow to the European Union, which relies heavily on Qatari imports to offset reduced Russian gas flows, leaving the bloc facing skyrocketing prices (with benchmark Dutch TTF contracts surging up to 50% in a single day) and heightened vulnerability to an energy crunch just as storage levels sit well below historical averages.

Oil markets have reacted swiftly. On Tuesday, Brent crude rose above $82 per barrel, while U.S. WTI surpassed $76. More alarming for European capitals has been the surge in gas prices, which jumped by 40% in Europe on Monday and rose by a further 30% at Tuesday’s opening, breaking through the €60 per megawatt hour threshold – the highest level since August 2022. The spike is closely linked to the disruption of LNG production in Qatar, the world’s second-largest LNG exporter after the United States, unsettling global markets and threatening energy security in both Asia and Europe.

Although the official heating season ends on 31 March, Europe will require significant LNG deliveries in spring and summer to refill gas storage facilities, which have fallen to their lowest levels in years. According to Gas Infrastructure Europe, EU storage sites were only 30% full on 1 March, following a winter marked by low temperatures that accelerated withdrawals at the fastest pace in five years.

The macroeconomic implications for the Eurozone are now under scrutiny. In an interview with the Financial Times, European Central Bank chief economist Philip Lane warned that a prolonged war in the Middle East and a persistent reduction in energy supplies could have significant macroeconomic effects. “From a directional perspective, an increase in energy prices puts upward pressure on inflation, especially in the short term,” he said, adding that such a development would be negative for growth. The scale of the shock, Lane stressed, would depend on “the magnitude and duration of the conflict” and could be amplified by a repricing of risk in financial markets.

Despite the risks, Lane ruled out an immediate shift in monetary policy, describing the current situation as “acceptable”. In the absence of a “large and durable” shock, the Eurozone economy would continue growing close to its potential, with unused capacity, particularly in manufacturing. He saw no case for taking additional inflation risks in this context.

On the diplomatic front, EU positions differ sharply. German Chancellor Friedrich Merz adopted a pragmatic tone, saying Berlin would not “lecture” partners over their military strikes on Iran. Spain, by contrast, condemned what it described as the illegality and recklessness of unilateral action. Prime Minister Pedro Sánchez warned of an escalation with unpredictable consequences, citing the paralysis of the Strait of Hormuz and surging oil prices.

Meanwhile, Tehran has warned European countries against joining the conflict, stating it would consider any European military action as an act of war. With hostilities expanding to energy infrastructure, diplomatic sites and shipping lanes, and with no clear exit strategy in sight, the crisis risks becoming prolonged.

The original article in Italian can be found here.

Caption: Facades of high-rise buildings of the West Bay financial district are seen in Doha, Qatar, 3 March 2026. U.S.-Israeli military operations have triggered global economic disruptions, including closed airports and rising oil prices. These shifts follow increased markets concern over an escalating regional war. EPA/HANNIBAL HANSCHKE